Arguably the most important aspect of a vessel contract is for the seller to provide a clear title, free from any debts, liens, security interests, etc. The agreement should specifically require the seller to transfer the title free from any and all encumbrances and provide proof of removal, if any encumbrances exist. Savvy buyers should request an abstract of title from the National Vessel Documentation Center, which is available only on boats documented with the Coast Guard. The abstract provides a summary of previous transactions and any encumbrances or liens relating to a particular vessel. Any mortgages or claims of lien against the vessel should be addressed prior to closing.
Additionally, a contract should request the seller to provide a warranty of title, in which the seller not only guarantees a clear title but also indemnifies and holds the purchaser harmless from any liability resulting from a breach of the warranty. When the seller is an entity, the contract should specifically request the warranty of title or guaranty be from a beneficial owner or principal of the selling entity rather than just the company itself. This is important because the company could be dissolved subsequent to closing and potentially impact the ability of the buyer to recover any losses as a result of a breach.